When Treasurer
Chris Bowen
unveiled the latest iteration of our national fiscal condition, he was at pains to say we were not confronted with a crisis but a transition.

It was rather like the pilot of an airliner telling us to tighten our seat belts because there could be some turbulence ahead.

To reinforce this notion of only temporary discomfort, Mr Bowen assured his audience that the budget would be back in surplus in 2016-17.

Two figures stood out in his presentation. Unemployment is now expected to reach 6.25 per cent in the current financial year and the following one. After that, it is projected – not forecast – to fall back to 5 per cent. Thanks to the “recovery" in the labour market, the budget would move back towards surplus, completing its journey to that destination in 2017.

If we fall short of that 5 per cent, then the required balance sheet adjustments – higher income tax collections and lower unemployment outlays – would not be forthcoming. The budget would remain in deficit.

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When questioned on the basis for the expected dramatic improvement in the labour market, Finance Minister
Penny Wong
replied: “Well, this is Treasury advice and the advice is that we anticipate a softening in the economy in the current financial year but a return to trend growth beyond that." A few bumps of turbulence and then back into clear skies.

If only it was that simple.

Capital investment in the mining sector during the boom has been running at 8.1 per cent of GDP. The long-term trend has been 1.8 per cent. The boom has had an impact directly, and indirectly, on the whole Australian economy, with a spike in our terms of trade which drove up the exchange rate, thereby providing a windfall lift in household purchasing power.

Now the boom is deflating.

Here is what investment bank Morgan Stanley told its clients this week: “A severe and prolonged decline in Australian engineering and construction (E&C) appears the most likely of current developments. Australian E&C activity has grown continuously for 12 years with activity in 2012 some 598 per cent above that of 2001. The golden run is over – our forecasts now suggest we are entering a period of double-digit declines in activity driven by declining E&C capex, an event that is unprecedented in the 27 years of data we hold. We think the real downturn is only now about to begin."

That means the current reporting season will not reflect the full scale of disruption about to hit the E&C sectors.

The widespread use of fly-in, fly-out labour combined with the scale of the boom suggests its bust will be transmitted across the entire economy.

Curiously, the jobs issue has not attracted the attention you might expect, at least from the coalition, during an election campaign.

After all, according to the pollsters, the electorate’s main concerns are economic – jobs, health and education.

Instead, more attention is directed towards the asylum-seekers’ boats and dumping the carbon tax.

These are the issues that apparently matter in Sydney’s western suburbs, which are seen as the battleground where the election will be decided.

Under
Tony Abbott
’s leadership the parliamentary arm of the Liberal Party adopted the view that it would not venture into the industrial relations arena for fear of reviving the Work Choices debate.

Despite the urgings from the Liberals’ business-connected supporters to champion the cause of workplace reform, Abbott and his colleagues continue to regard this as a no-go area.

They believe Work Choices cost the Coalition government in 2007.

This self-imposed vow of silence by the Liberals suited a Labor government where the control exercised by unions over the parliamentary party was seen as a growing negative for the party.

Consequently, we have had no public debate about labour markets for years. In turn, that has acted as a censor on such crucial public policy areas as our international competitiveness.

Without public debate on such matters where competing claims can be explored and tested, there can be no prospect of reform and progress.

While our politicians have kept their heads firmly buried in the sand, employment and associated issues have risen to the top of the political agendas in all the other developed economies.

Those issues range across such subjects as growing economic inequality, the squeezing of the middle class, funding welfare in economies where high unemployment has become entrenched, the implications of extended and high unemployment among youth, the spread of casualisation, and the threat of currency skirmishes turning into virtual wars.

Riots in Spain, Greece and Portugal

We have seen riots in Spain, Greece and Portugal. In the US, there have recentlybeen mass walkouts by fast food workers protesting about minimum wage levels.

These can be seen as a byproduct of the global financial crisis, though there is a much more unorthodox, but plausible, explanation being advanced, certainly one worth pondering. It is that the era of high, basically continuous, economic growth is running out of steam.

The author of this thesis is
Robert Gordon
, a professor at Northwestern University, Illinois. He focuses on the US as the current definer of the frontier of growth. Other countries benchmark themselves against the US.

Gordon has been workshopping his provocative ideas with public performances involving question and answer sessions.

While these are being assembled in a book in progress, you can download a paper published last year entitled “Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds".

His starting point is that there was virtually no growth before 1750 and thus there can be no guarantee that growth will continue indefinitely. Rather, he suggests, the rapid progress made over the past 250 years could well turn out to be a unique episode in human history.

Even if he is wrong about the pace of innovation with its job-creating capacity slowing down, Gordon argues that six headwinds will materially slow down future growth.

Those headwinds? Demography, education, inequality, globalisation, energy/environment, and the overhang of consumer and government debt.